You Have 6 Years to Maximize Your Income. The Economic Singularity
What should a value investor do?
The world is changing at an unprecedented pace, driven by the rapid evolution of artificial intelligence (AI) and robotics. These advancements are not only transforming industries but are also redefining the fundamental rules of the global economy. In the next six years, we have a unique window of opportunity to maximize our earnings before the economic structures we know become unrecognizable. Understanding this phenomenon and preparing to make the most of this critical period is essential.
1. Understanding the Economic Singularity
The "Economic Singularity" refers to a point where advanced technologies like AI and robotics will transform the economy so profoundly that traditional models will no longer be able to explain or predict economic outcomes. This is expected to occur around 2030 when a combination of productivity growth, population decline, and AI advancements will create a drastic shift in how income is generated and distributed.
1.1 The Three Drivers of Economic Growth
Historically, GDP growth has been driven by three key factors:
Population Growth: More people generate more demand and labor force.
Productivity Growth: Better technologies and work methods increase output per unit of labor.
Debt Growth: The use of debt has financed investments that drive short-term growth.
However, these drivers are failing:
Populations in developed countries are aging and, in many cases, shrinking.
Productivity has not been able to offset the loss of labor due to aging.
Debt growth has reached unsustainable levels, and now much of the new debt only serves to pay off old debts.
2. The Role of Artificial Intelligence and Robotics
Artificial intelligence is advancing at a staggering pace. Currently, AI is estimated to have an intelligence equivalent to an IQ of 100, which is comparable to an average human. However, in the coming years, AI is expected to reach IQ levels exceeding 400, representing intelligence and processing power far beyond what any human can achieve.
2.1 Impact on Productivity
Automation of Work: Machines and robots will replace humans in many tasks, from manufacturing to creative and administrative work. Companies like Amazon already employ more robots than humans, and this is just the beginning.
Productivity Multipliers: Cheap renewable energy, combined with advanced AI, will allow massive increases in productivity, reducing costs and accelerating production.
3. What Industries will thrive the Future
During this period of transformation, there are two key areas: technology and cryptocurrencies. Both represent the only secular growth opportunities in an environment where most other industries will face significant disruptions.
3.1 Technology
Tech Companies: Companies leading in AI, robotics, and renewable energy have extraordinary growth potential. The exponential growth in these areas will far exceed that of any traditional sector.
Rapid Disruption: The speed at which new technologies will replace old ones means that investments must be agile. The ability to rapidly iterate products and services will be key to surviving and thriving.
3.2 Cryptocurrencies
Explosive Growth: Cryptocurrencies have proven to be the highest-performing asset in recent history, and this growth will continue as they integrate into the new digital economy.
Cryptocurrency in AI: As AI and autonomous agents (AI agents) become more common, cryptocurrencies will become the primary medium of exchange due to their adaptability and decentralization.
4. Transformation of Business Models
Businesses as we know them are about to change radically. AI will enable the creation of companies with only one human employee, while the rest of the operations will be managed by machines and algorithms.
4.1 AI-Driven Companies:
Fast Iteration Cycles: Businesses will be able to develop, test, and launch products in days or even hours, instead of the months required today.
Industry Disappearance: Some industries will disappear almost overnight, unable to compete with the efficiency and speed of AI-driven companies.
5. The Value of Community and Human Connection
In an increasingly digital world, the value of human connections and communities will grow exponentially. Communities will provide a sense of purpose and belonging in an environment where traditional structures are being dismantled.
5.1 Universal Basic Equity:
Participation in Digital Communities: Instead of a universal basic income, we may see the creation of a universal basic equity system, where individuals participate in digital communities that provide them with both purpose and income.
The Importance of Community: Companies that focus on building and maintaining strong communities will have a better chance of surviving in this new environment.
6. Industries at Risk
As AI and automation continue to evolve, certain industries are more vulnerable to disruption. Here are some of the industri’s most at risk:
Manufacturing and Industrial Production: Automation and robotics will replace many human workers in factories and production lines.
Transportation and Logistics: The rise of autonomous vehicles could displace truck drivers, taxi drivers, and other transportation workers.
Retail and Sales: E-commerce and automated checkout systems threaten jobs in physical stores.
Financial Services and Accounting: AI-driven automation could reduce the need for accountants, auditors, and financial analysts.
Customer Service and Call Centers: Chatbots and virtual assistants will handle a growing share of customer interactions.
Legal Sector: AI tools for contract review and legal research could replace paralegals and even some lawyers.
Creative Industries: AI-generated content in writing, music, and art could disrupt traditional creative roles.
Construction: Robotics and 3D printing technologies could replace many construction workers in building and infrastructure projects.
7. Industries Poised for Growth
While some industries face decline, others are set to thrive in the coming years. Here are the industries with the strongest growth potential:
Technology and Artificial Intelligence: Companies developing AI, machine learning, and cybersecurity solutions are at the forefront of technological advancement.
Renewable Energy: Solar, wind, and energy storage technologies are leading the charge in the transition to sustainable energy.
Biotechnology and Health: Personalized medicine, telemedicine, and biotech innovations will drive growth in the healthcare sector.
Blockchain and Cryptocurrencies: The blockchain industry is set to grow as more sectors adopt decentralized technologies.
Automation and Robotics: Advanced robotics and automation technologies will see increased demand across multiple sectors.
E-Commerce and Digital Services: E-commerce platforms and cloud computing services will continue to grow as digitalization expands.
Education Technology: EdTech and online learning platforms will rise as demand for digital skills and remote education grows.
Space Industry: Private space exploration and satellite deployment are emerging as key growth areas.
Augmented Reality and Virtual Reality (AR/VR): AR/VR technologies are revolutionizing entertainment, education, and business operations.
Food and Agricultural Technology: Sustainable farming and food production technologies are critical for meeting global demand efficiently.
8. Value Investing Perspective
However, as a value investor, I know very well that it's incredibly unlikely to pick the winners in technology. The technology sector is notorious for its volatility and the difficulty in forecasting which companies will dominate in the next decade. This unpredictability creates a significant challenge in valuing tech companies, particularly when considering how the economy and these companies might evolve over 10 years.
Yet, opportunities often exist where no one else is looking. Take Oroco ticker $ORRCF as an example. While I may not be able to accurately value the future of an AI company, I do know that Oroco's land holdings are technically worth an after-tax value of $1.48 billion. Yet today, it sells for just $63 million on the stock market. Even if someone buys the property at a significant discount, it still offers a substantial margin of safety—a core principle of value investing.
This discrepancy between intrinsic value and market price presents a compelling opportunity for investors who are looking for safer bets in a highly uncertain economic landscape.
9. Conclusion: Seize the Next Six Years
The next six years are crucial. The speed at which technology is evolving means we must act now to secure our future. Whether through technology and cryptocurrency investments or discovering undervalued opportunities like Oroco, the key is to position ourselves advantageously for the coming transformation.
The clock is ticking